SME CHARACTERISTICS and STATISTICAL NEEDS in the PHILIPPINES

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SME CHARACTERISTICS andSTATISTICAL NEEDS in
thePHILIPPINES
By Benel P. Lagua
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• Small and Medium Enterprises in the Philippines
• Current State of SMEs in the Philippine Economy
• Available SME Statistics
• Deficiencies in the present system of SME
  statistics
• Current initiatives to develop SME statistics
• Conclusion

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A. SMALL MEDIUM ENTEPRISES in the Philippines
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Recently, Republic Act No. 9178, otherwise known
as the Barangay Micro Business Enterprise
(BMBE) Act of 2002 has redefined the categories.
Hence, the present structure, by law, is as
follows Micro - up to 3,000,000
Small - P3,000,001 - 15,000,000 Medium
- P15,000,001 - 100,000,000
Large - above P100,000,000
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B. Current State of SMEs in the Philippine
Economy 1. Number of Establishments and
Employees According to the 2001 statistics of
business establishments published by the National
Statistics Office, there are 811, 589 business
establishments in the country. Of total,
micro-enterprises account for 743,949 (97.1),
small enterprises 61,759 (7.6), medium
enterprises 2, 923 (.4), and large enterprises
2,958 (0.3).
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2. Geographic Distribution

• The analysis of geographic distribution of
  enterprises throughout the country indicates a
  high concentration in the National Capital Region
  (NCR), which accounts for 24.4 of all
  establishments and 40.1 of all employees.

• The five regions subject to the present study
  (NCR, Regions 3, 4, 7 and 11) hold a combined
  share of 65.0 of total establishments.
  Similarly, the regions account for 72.1 of total
  employees. As a result, around two-thirds of SMEs
  are concentrated in the five regions.

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• 3. Sales and Value Added
• by SMEs
• The recent trends in value added by SMEs in the
  country and their sales indicate a growing share.
  SMEs as a whole have been steadily growing year
  after year with the overall industrial growth, as
  indicated by relevant factors, including the
  number of establishments and the number of
  employees.
• Nevertheless, compared to the absolute number of
  establishments and employment, SMEs hold
  relatively small share of value added and sales,
  less than 30, thus suggesting their development
  potential in the country.

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C. Available SME Statistics

• 1. National Statistics Office
• The primary source of statistics on Philippines
  SMEs is the National Statistics Office.

NSO is the major statistical agency at the
national level responsible in collecting,
compiling, classifying, producing, publishing,
and disseminating general-purpose statistics.
Statistics on the census of establishments is
done every 5 years
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• 2. Loans lent to SMEs
• All lending institutions are required to lend
  set aside at least 6 of their total loan
  portfolio to small enterprises and at least 2 to
  medium-sized enterprises.

The Republic Act 6977 enacted in 1991 (the Magna
Carta for Small Enterprises) required 10 more to
be diverted to SMEs. Then, it was amended in
1997 under the Republic Act 8289 to extend the
applicable period to 2007 and lower the minimum
level to 6 and 2. The Bangko Sentral ng
Pilipinas is mandated by law to monitor this
initiative.
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• 3. Tradeline Philippines
• Tradeline Philippines is an online database
  service that provides product search listing
  thousands of manufactured exported Philippine
  products complete with product specifications and
  is a business search allowing users to contact
  Philippine exporters, suppliers and local/foreign
  buyer details and the products/services they
  manufacture / provide and export

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• 4. Exponet
• The Bureau of Export and Trade Promotion's (BETP)
  Export Assistance Network (EXPONET) helps
  exporters and prospective exporters access
  information and resolve specific problems related
  to exporting
• Exponet provides information on export seminar
  schedules, export organizing, export procedures
  and documentation, import facilities for
  exporters, buyer linkages, export financing and
  incentives, product raw material sourcing and
  other statistical information. The agency also
  assists exporters in export-related problems /
  trade complaints.

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D. Deficiencies in the present system of SME
statistics

• 1. Timeliness
• Statistics on the census of establishments (done
  every 5 years) and the annual survey of
  establishments are usually released 15-24 months
  after the year. This makes the data more or less
  an imprecise tool for analysis and
  decision-making.

• In the same manner, BSP collects information on
  the loans lent to SMEs (in compliance with the
  Magna Carta for Small and Medium Enterprise)
  every quarter. The data athered is usually
  released only after 3 months.

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• 2. Cross compatibility with other
• countries for cross country comparisons
• The major classification used by most countries
  to define SMEs is through assets and employment
  size. However, the size ranges of their
  classification differ, since developed countries
  have large industries than the less developed
  ones.
• Hence, what might be considered as small by
  developed countries will already fall into the
  medium or large category for developing
  countries like the Philippines. Thus, cross
  compatibility with other countries for cross
  country comparison, is sometimes inappropriate or
  could not be used as basis for a policy
  recommendation.

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• 3. Inadequateness
• The scope and coverage of SME statistics are
  limited to 1) the number of establishments, 2)
  employment contribution, and 3) regional
  distribution. More important data which will help
  policy makers and businesses to react quickly in
  a competitive environment are usually not
  available. These statistics include
• Export contribution of SMEs
• (direct and indirect contribution)
• Contribution of micro enterprises/
• informal SMEs to GDP, etc.
• Sectoral statistics/Growth potentials
• of industries.

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• 4. Availability
• There are confidentiality clauses in census for
  firm level data. This cannot be accessed at the
  National Statistics Office because their agency
  has to comply with the rules of confidentiality.
• In similar ways, banks also ensure that access to
  customer information is limited to selected bank
  employees and are very conservative in disclosing
  client information.

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• 5. Coverage
• The Philippines has a large section of small
  business constituting the so-called underground
  or informal economy. This refers to the small
  scale units in the national economy, which
  produce and distribute goods and services without
  the benefit of official sanction or control.
• They don't register, don't keep books and don't
  pay taxes. They operate beyond the reach of the
  law. They have little or no access to organized
  markets, credit institutions, educational or
  training centers or public services. Although
  efforts are being made by the government to bring
  the underground economy to the surface, the
  nature of this sector makes it very difficult to
  gather and process statistics on them.

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• E. What are the current initiatives to develop
  SME statistics?

• National Business Registration (NBR) Project
• The NBR project aims to address the growing
  concern of having consolidated information on all
  the registered businesses in the country.
• Currently, no government agency has a complete
  record of all registered businesses since
  registration is being done by various agencies.
  It is the objective of the NBR project to
  integrate the information contained in the
  various agencies and have a single consolidated
  database containing basic information of all
  registered businesses.
• The NBR project is considered a timely project
  for the country in this day and age of global
  economy. The NBR will not only enable Filipino
  entrepreneurs to find business ventures with
  fellow Filipinos but with foreign investors as
  well.

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• 2. SME Database Project
• The SME Database (headed by the DTI SME-Project
  Management Office) aims to act as a repository
  (databank) of the corporate profiles of SMEs. Its
  objective is to serve as a tool for monitoring
  the assistance given by the different agencies to
  each SME firm. The database is also designed to
  identify individual companies and to track the
  kinds of government assistance given to each.
• The interim database will enable the much-needed
  tracking of SMEs during the crucial first six (6)
  months of 2003, especially for measurement
  against the National SME Agenda objectives. The
  final database could act as a master database of
  all SMEs nationwide, possibly supporting other
  organizations outside DTI, and would allow for
  more complex analysis and reporting. A networked
  database would facilitate the encoding of data
  from the provinces at the source of the
  information
• The ultimate benefit of the SMEs is the
  possibility of minimizing, if not eliminating the
  need to register numerous times with various
  organizations.

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• F. Conclusion
• While the SME sector is recognized as the focal
  point for growth that will ensure that the
  Philippine economy moves forward despite the
  threats of an unfavorable global environment, the
  overall fiscal condition of the country prevents
  it from being given utmost financial support.
• Development programs have been laid out but
  resources are not readily available because of
  competing demands for government support.

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• It is also in this light that the government is
  open to learn new modalities in gathering and
  analyzing data. The administration has given
  outmost policy attention to SME development and
  hopes that that through new and better
  development initiatives, stakeholders can move
  the program forward.

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• Thank you very much
• and
• MABUHAY!!!